'Like supporting a football team': why whistleblowers are shunned at work

In October 2011, Michael Woodford started the job of a lifetime. The Englishman had spent three decades climbing the corporate ladder at Japanese camera and medical company Olympus, first as a salesman, then rising to head up its Europe operations.

Former Olympus chief Michael Woodford. Credit:Bloomberg

Finally, he had reached the very top of executive ranks - president and chief executive officer, based in Tokyo.

But it wasn't to last. Within two weeks, Woodford found himself sacked and on his way back to the UK, fearing for his life.

Woodford's now-infamous ousting came after he asked questions about irregularities in Olympus' books, first uncovered by a Japanese investigative magazine.

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These "irregularities" were warning flags for what turned out to be a 20-year, $US1.7 billion ($2.4 billion) accounting fraud at the 99-year-old company, aimed at concealing losses from investments that went wrong during the 1990 Japan stock market crash.

These losses had been hidden in various ways, including via overpriced "acquisitions" of shell companies set up by Olympus, and massive fees for "advice" paid to an offshore entity. The plan, as set out in a detailed investigation's report released by the company, appeared to be to hide the loses long enough to eventually make them back. Needless to say, it didn't work.

Most people don't do bad things but most people don't want to get involved

In the space of a few days, Woodford become one of the world's most high-profile corporate whistleblowers, marshalling the media and alerting regulators, including the UK's Serious Fraud Office.

The US Federal Bureau of Investigations was in touch soon after.

In 2012, after raids on Olympus sites and investigations by agencies in three countries, multiple Olympus figures were arrested; three were convicted and handed suspended sentences, including Tsuyoshi Kikukawa, the Olympus chairman who had sacked Woodford, who had worked for the company since 1964.

Woodford is now a high-profile advocate for whistleblowers, including as patron of the UK charity Protect, which runs a whistleblowing advice hotline.

Speaking to Fairfax Media from the UK, Woodford says the problem for corporate whistleblowers is that many workplaces still have an inward-looking culture, where supporting the company becomes "like supporting a football team".

Whistleblowers need protection, he says, and the strong backing of regulators, who need to be open about soliciting whistleblower information - and then active in following it up.

"I had a British passport, I had the ability to galvanise the media and draw a spotlight to it... I was a CEO with financial resources who had a law firm to protect me," Woodford says of his own experience. Even so, he adds that "weeks after I was fired I thought I would be crushed by it".

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Speaking out

"If you start asking questions, you find things are wrong and choose to turn away and not do anything - you become part of it," Woodford says.

"The majority of people never find themselves in that situation, so it's hard to be judgmental about others... most people don't do bad things but most people don't want to get involved."

Woodford advocates for compulsory rotation of auditors - Australian standards require audit partners to rotate after seven years, but not audit firms - as well as independently-run whistleblower lines, as "practical" company measures that could reduce the risk of an Olympus-style fraud.

But Woodford is unsure about the merits of rewards, such those paid in the US by agencies including the Department of Justice and the Securities and Exchange Commission, which hand whistleblowers a portion of fines levied on companies they have help prosecute. Multimillion-dollar bounties are not uncommon.

A 2017 parliamentary inquiry called for Australia to launch a similar reward scheme, as well to establish a dedicated Whistleblower Protection Authority. The Coalition government is yet to commit to these measures, and is still to pass promised legislation beefing up current whistleblower protection laws.

"I'm respectful of the argument that by incentivising whistleblowers more things will come to light," Woodford says, but confesses he is "uncomfortable" with the idea. He is concerned that such massive payouts "would make people very cynical about whistleblowers, which you don't want".

"People should be protected if they lose their careers, if their reputations are harmed - there should be redress, but it should be looked at on an individual basis by a court," he says.

Mr Woodford is a speaker at the World Congress of Accountants, being held in Sydney on November 5-8.